Cleveland-Cliffs' Planned Buy of Stelco Won't Buttress the Technicals
Let's check the charts and see why another steel name might be a stronger stock right now.
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Cleveland-Cliffs CLF is reportedly positioned to buy Canada's Stelco Holdings STLC in a $2.5 billion cash-and-stock deal. Traders may remember that CLF bought AK Steel Holding and the U.S. operations of ArcelorMittal in 2020.
Let's check out the charts of CLF.
In this daily bar chart of CLF, below, I can see that prices made a deep correction in the past three months. Prices are in a downtrend but are testing the 50-day moving average line.
The slower-to-react 200-day line is nearly flat. The On-Balance-Volume (OBV) line has been struggling since December. The Moving Average Convergence Divergence (MACD) oscillator has been improving, but still remains below the zero-line.
In this weekly Japanese candlestick chart of CLF, below, I can see a large sideways trading range market. Prices are trading below the cresting 40-week moving average line. The weekly OBV line has been weak the past four months and tells me that sellers of CLF have been more aggressive than buyers. The MACD oscillator is in a bearish alignment below the zero-line.
In this daily Point and Figure chart of CLF, below, we get another look at the sideways price action. Here the software is suggesting we could see a decline to the $7 area.
In this second Point and Figure chart of CLF, below, I used weekly price data. Here the software suggests a potential price target in the $11 area.
Bottom line strategy: The charts and indicators for CLF are not attractive at this time. If you are looking for a steel company to add to your portfolio I would rather you consider Steel Dynamics STLD - the charts are more positive.
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